Chile, Blocked From Nafta, Joins Mercosur

June 27, 1996|By LAURIE GINGOER Chicago Tribune and Business Writer Charles Lunan contributed to this report.

BUENOS AIRES, Argentina — Chile, frustrated in its efforts to join NAFTA, has signed on as an associate member of Mercosur, South America's largest free-trade market.

Mercosur's members - Brazil, Argentina, Paraguay and Uruguay - praised Chile's entry, which will take effect Oct. 1, as a strengthening of the fledgling bloc, launched in January 1995.

Under the agreement, signed on Tuesday as part of Mercosur's annual economic summit, tariffs on most products sold within the bloc will drop over eight years, reaching zero in 2004.

Chile's associate-member status leaves the door open for a future arrangement with the North American Free Trade Agreement.

But Mercosur members, particularly Brazil, are expected to press instead for expansion of Mercosur throughout South America to create a market capable of negotiating on an equal basis with NAFTA, rather than being absorbed by it.

The inclusion of Chile, the most economically developed country in the region, gives the Mercosur bloc access to a robust economy of 14 million people and to Chile's Pacific Ocean ports - vital gateways to commerce with Asia.

With Chile's inclusion, the trade bloc will encompass more than 220 million South Americans, from the Amazon to Patagonia at the far south, and access to the Atlantic and the Pacific. The trade bloc's combined gross domestic product will be more than $900 billion.

The agreement marked another lost opportunity for the United States, where rising protectionism in Congress and the approaching election caused the Clinton administration to back off its efforts to bring Chile into the North American Free Trade Agreement, said Jerry Haar, an associate at the University of Miami's North South Center.

In the meantime, Mercosur members, particularly Brazil, are expected to press for expansion of Mercosur throughout South America.

"I think you will see Mercosur turning into SAFTA [South American Free Trade Agreement) and linking up with NAFTA as a block," Haar said.

Bolivia, the region's least developed country, yet one rich in natural resources, said it had signed an agreement to join Mercosur. A formal agreement with Bolivia, expected within 90 days, will bring to six the number of members.

Chile's growing sophistication in trade presents a challenge to Florida, which lacks the national distribution companies that Chilean exporters are looking for as partners, Haar said.

Haar said that while Florida's trade infrastructure was good, the state still lacked a strong university system and the manufacturing base needed to make it a world-class competitor. Even the state's ports remain vulnerable to losing business to other ports on the Eastern seaboard.

"This notion that airports like Miami and Fort Lauderdale are the center of the realm for international trade is fallacious," Haar said. "Philadelphia and Baltimore will capture more and more of the traffic."